Difference between monetary and non-monetary items
What is the difference between monetary and non-monetary items?
Monetary items are those assets and liabilities that are cash or readily convertible into cash. However, the essential feature is the existence of a right to receive or obligation to deliver a fixed or determinable number of units of a currency. For example, provisions to be settled in cash or cash dividends which are already recognised as liability or liabilities such as employee benefits to be paid in cash are examples of monetary items that are liabilities. Investments in debt securities held solely with the objective of collecting contractual cash flows. In other words, debt securities that are classified as measured at amortised cost are monetary items. In a non-monetary item, the essential feature is the absence of a right to receive or an obligation of delivering a fixed or determinable number of units of currency. For example, pre-paid amounts such as pre-paid rent, etc, inventories, properties, plant and machinery are examples of non-monetary items. Investments in equity instrument is also a non-monetary item, as the amount receivable from the liquidation of such investments cannot be specified in a determinable number of units of currency as it would depend upon the market rates of such investments.
